Prabowo’s Success in Controlling Inflation Hides Challenge from Weakening Purchasing Power

JAKARTA, investortrust.id - President Prabowo Subianto's administration, which has been running for 100 days, has shown positive achievements, particularly in maintaining inflation stability. However, weakening purchasing power remains a challenge that needs to be addressed promptly.

M Rizal Taufikurahman, head of the Macroeconomic and Financial Center at the Institute for Development of Economic and Finance (Indef), revealed that although inflation has been on an upward trend from January to December 2024, it remained stable during the November-December 2024 period.

"This inflation rate over these 100 days reflects Mr. Prabowo's success in managing price stability, especially volatile prices. This indeed demonstrates the government's achievement," he stated during a public discussion titled "100 Days of Asta Cita Economy, Satisfactory?" held by Indef online, Wednesday, Jan. 29, 2025.

Several key factors contributing to this success include improved food supply management, global commodity price stability policies, and strategic government measures in responding to economic dynamics, including the controversial 12% Value-Added Tax (VAT) policy.

Despite this, Rizal mentioned that the challenges ahead are still significant. The implementation of the 12% VAT could potentially impact inflation, particularly for luxury goods. Additionally, domestic demand remains relatively weak, which could affect overall economic growth.

"Domestic demand is also a critical aspect in maintaining inflation stability. While the inflation stability is positive, it still shows weak domestic demand, which will certainly impact overall economic growth. Policies that can boost domestic consumption are crucial, including strengthening purchasing power," he said.

According to Indef's records, there is a variation in inflation levels across regions. Some areas, like Papua, have recorded inflation above 1%, while Java and Bali are more controlled with inflation below 5%. This discrepancy reflects the challenges in managing prices across regions, influenced by geographical factors, infrastructure, and distribution efficiency.

"This is an important note on how the government can address these varying conditions by building the necessary infrastructure for the people. It also involves exchange rates," he said.

The rupiah exchange rate trend from October 2024 to January 2025 has shown stability, despite experiencing some weakening. This stability is crucial for maintaining export competitiveness amid global economic uncertainties.

"Thus, the continuity of this stability also heavily depends on the government's response to external pressures and more efficient fiscal management," Rizal concluded.